Port Audit delays $418 million dollar rental car facility project at SeaTac

by Christopher Cain

1-22-08

Port of Seattle Commissioners delayed authorizing funding to begin a plan to construct a $ 418 million dollar rental car facility which has been in the works for over ten years; citing problems resulting from a recent state audit which found $100 million in construction project cost overruns and unauthorized cost elevations.

Port of Seattle staff, including CEO Tay Yoshitani, recommended the delay citing concerns that public trust has not been fully restored in the wake of last December's Performance Audit by Washington State Auditor Brian Sontag.

Lori Talarico, lead negotiator for the rental car companies pleaded with Port staff and commission not to delay the project “ we pay a significant amount of money for the right to do business here” Talarico said. Talarico also cited rising fuel costs and construction material prices as reasons not to delay the project. “time added is cost added” she said

Port Commissioner Patricia Davis tried in vain to get the commission to change direction against a strong current. Commissioners Tarleton, Hara and Bryant lead the charge to make sure the public purse was not opened until a port Audit Action Plan was in place and until the commission “feels very positive that the issues had been addressed” Mr. Hara said.

“Four hundred million is no chump change” Mr. Hara continued, as he tried to push forward a motion that would prevent the port from authorizing “any major projects until the elements of the audit are resolved”

Davis countered that there was no clear definition of the wording of the motion. Specifically, Davis took issue with the word 'major' and just how each commissioner would define it. “ I hesitate to pass this because it might put us in a bind' Davis said. In the end, Commissioner Hara was forced to withdraw his motion and allow the commission to vote on the resolution to delay the project. The resolution passed unanimously.

CEO Tay Yoshitani declined to establish a firm date for when the Action Plan would be in place, but suggested it could be in time for the absolute deadline for approving the project in time for a start in this years construction season. “ I don't want to create false hope” Mr. Yoshitani said, “ we might still be able to make this deadline.” The deadline for authorizing the first $5 milion of “soft money” would be in mid February. Mr Yoshitani has had his staff working “all weekend” for several weeks to finalize details of the Action Plan

The audit, which found $100 million in cost overruns and attracted the attention of federal agents, who are now investigating for fraud, was presented to the Port in draft form last August. When it was finally released in December it caused public outrage and widespread mistrust of Port spending and commission oversight and or the lack thereof. Several bills, including one to limit Port taxing authority, are now being considered by the state legislature.












Port Moving Forward with $333 million Rental Car Facility

By Christopher Cain

The Port of Seattle operates SeaTac International Airport as a self-sustaining business unit of the Port. SeaTac's largest source of revenue is its contract with the airlines.  The second largest source of revenue is 'landside or 'ground access' operations,' which include concessionaire contracts with rental car companies.

There is limited space for operation of rental car facilities at SeaTac, so rental car companies must compete for space in a public bidding process. Five companies become full service providers, four become limited service providers, and the rest may become off-airport concessionaires. 

Full service providers rent both counter space in the airport building and airport garage space to park and maintain their cars.  Limited service providers rent counter space in the terminal building but do not rent space in the airport parking garage, so their customers must take a shuttle to an off-site location to pick up a rental car. 

Off-airport rental car providers do not maintain either counter space or garage space at the airport; those providers pick up customers at the airport and drive them to another location to complete the car rental transaction.

To relieve impending growth and related congestion problems, the Port of Seattle has been planning to build a $278 million Consolidated Rental Car Facility to house multiple rental companies. In addition, the Port plans to construct $14 million dollars worth of related off site road improvements, and a $13 million bus maintenance facility. Buses would shuttle renters between the new facility and airport. The cost of purchasing the buses and property acquisition would push the total package to $333 million.

Funding for the project would be a mix of General Aviation Revenue Bonds and new Customer Facility Charges. The latter, going to pay for the bulk of the construction costs.

Rental car customers are already paying a $4.00 per day of rental fee at SeaTac Airport. When the project is complete the fee will rise to $5.00 per day of rental. In 2006 the Port collected nearly $18 million in fees for the project.


History

Before 1998, the Port’s contracts with rental car companies included a provision prohibiting the companies from separately adding fees to a customer's bill based on concession fees or any other airport charge. Therefore, before 1998, rental car bills did not include a line item attributing part of the customer's bill to airport fees. That changed after one rental car company sued the Port.

The Port concluded that it cannot legally prevent rental car companies from recouping their concession fees from their individual customers; the Port does not endorse the practice, let alone require it.

Douglas Branson is a resident of Pennsylvania who regularly travels to Seattle.  He rented cars from limited service rental car providers five times during the period of 1998-2000.  On each occasion, his bill included a separate line item charge to cover the concession fee paid to SeaTac.

Branson brought a class action lawsuit against the rental car companies and the Port, claiming that the concession fees charged by the Port violate the Federal Regional Airport Authority (RAA) requirement that airport fees allow for uniform public use of airport property.  He also claimed that the Port's concession fees are not uniform, reasonable, or established with due regard to the property used and the expense of its operation.  Finally, Branson argued that the rental car companies' practice of passing the fees through to customers violates the Consumer Protection Act (CPA).

The Washington State Supreme Court ruled in favor of the Port, clearing the way for new legislation to be passed in 2005 which would allow the Port to begin collecting Customer Facility Charges for the new facility.


Currently at issue

Completion of the project depends on the rental car companies cooperation with the Port to use the facility when complete. Part of the plan would require businesses to pay for tenant improvements, land rent at 8.5% and operation and maintenance costs.

Even with the new legislation and funding under way, some doubts remain as to whether the new facility would be cost effective for rental car companies.

Lori Talarico, a spokesperson for Avis and Budget addressed this concern to the Seattle Port Commission on Tuesday January 9, 2007 “we support the framework” currently being discussed by the Port and the rental car companies.

But Talarico said that a final agreement would depend on whether or not “business operation costs are less than the cost and risk projected in the transaction”

Port Commissioner Patricia Davis tried to assure Talarico by saying that the savings against rising fuel costs and convenience would out way any negative risk. But Talarico countered saying that the industry already included cost of fuel and convenience in their calculations.

Currently, 12 rental car companies operate out of SeaTac Airport, of which five are located in the airport parking garage, nine have counters in the airport itself and 3 are independent operators.

Another issue, which raised concern with Port Commissioner Bob Edwards, is the fact that some operators would or could opt not to use the new facility, and that the Port would require those companies to pay the CFC anyway.

Independent operators would be required by the Port to use the facility to shuttle customers from the airport to the new facility and then offsite to their private location and back. They would no longer be allowed to shuttle customers directly to and from the airport as they do now. They would however pay a slightly lower fee of $2.00 per day of rental, according to Port managers.

Agencies that do opt to lease the new facility would be required to sign a 30 year agreement which would coincide with the full term of the General Aviation Revenues Bonds.